Jackson National released the first fee-based fixed indexed annuity (FIA) that does not carry a surrender charge, the company announced Monday.
Surrender charges penalize contract holders for turning their contracts in early, a feature some analysts say is a stumbling block to penetrating the fee-based registered investment advisor market and boosting sales through broker-dealers.
The FIA, MarketProtector Advisory, is one of two FIAs to be launched Monday as part of a new family of FIAs, the Lansing, Mich.-based company said.
MarketProtector Advisory was launched at the same time as its commission-based sibling Market Protector, which carries withdrawal charges of five, seven and 10 years, depending on where the product is sold, Jackson said.
“MarketProtector Advisory encourages producers and advisors that may have been reluctant to step into the market on a fee-based FIA because of their concerns of selling something with a surrender charge,” said Marilynn Scherer, vice president of fixed and fixed index annuity product development for Jackson National Life Distributors.
Another key feature for both the fee-based and the commission-based versions of Market Protector is that the income streams are calculated on the products’ contract values, similar to a mutual fund, and not on the products’ benefit base.
A benefit base, sometimes referred to as a “shadow contract,” didn’t sit well with advisors who often stayed away from annuity sales because they were too opaque.
“That was an issue for advisors,” Scherer said.
Jackson’s Perspective Advisory II fee-based variable annuity, which was launched in November, also carriers no surrender charge.
Jackson is the nation’s largest seller of variable annuities.
A 'Game Changer?'
One analyst referred to Market Protector Advisory as a possible game changer in reaching fee-based channels.
When asking RIAs about fee-based FIAs, of which nearly two dozen have been launched from 10 companies over the past two years, the feedback is tinged with disappointment because of the surrender charge.
“If that is the only hang-up, the Jackson National MarketProtector Advisory may be a game changer,” said annuity market analyst Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., publisher of Wink’s Sales & Market Report.
“Fee-based indexed annuity sales contracted for 0.42 percent of 4Q 2017 sales, but this could open that up in a big way,” she said.
Plenty of FIAs have been launched in the past without a surrender charge, but those have all been commission-based FIAs.
Horace Mann is the only other company that offers an FIA with no surrender charge and it is commission-based, Moore said.
MarketProtector Advisory is the first fee-based FIA with no surrender charge, she said.
Advisors have long told distributors they want more simplicity in annuity product lineups.
MarketProtector Advisory and MarketProtector, like nearly all annuities, are designed to be used among a suite of retirement products, the fee for which advisors typically draw from a separately managed account or a money market account.
Individual broker-dealers set that fee, which often ranges from 50 to 100 basis points of the contract value.
Both the commission-based MarketProtector and the fee-based Market Protector Advisory FIAs come with market value adjustment features and two index options: The S&P 500 Index and the MSCI EAFE Index.
A lifetime income benefit rider is also available on both products.
“We think we'll pique the interest of advisors who have not jumped into this market yet,” Scherer said.
The release of the MarketProtector family comes at a sensitive time for the Jackson, a subsidiary of London-based Prudential Plc.
Prudential has announced it would separate its U.K. and Europe business from its U.S., Africa and Asia businesses -- resulting in two separate companies.
M&G Prudential will operate as an independent U.K. and European savings and investment company with headquarters in London.
The U.S., Africa and Asia units will continue to operate under the Prudential Plc. name, also with headquarters in London.
A.M. Best last week said it had placed under review with “developing implications” the financial strength rating and the long-term issuer credit ratings of Jackson National Group, which includes Jackson National Life, Jackson National Life of New York and Brooke Life Insurance Co.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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